Question & Answer

A 12-station transfer line was designed to operate with an ideal production rate = 50 parts/hour. However, the line does not achieve this rate, since the line efficiency = 0.60. It costs $75/hour to operate the line, exclusive of materials. The line operates 4000 hours per year. A computer monitoring system has been proposed that will cost $25,000 (installed) and will reduce downtime on the line by 25%. If the value added per unit produced = $4.00, will the computer system pay for itself within one year of operation? Use expected increase in revenues resulting from the computer system as the criterion. Ignore material costs in your calculations.

Identify at least two situations in which application of different accounting methods or accounting estimates results in difficulties in comparing companies.

Mayaguez Corporation provides its officers with bonuses based on net income. For 2014, the bonuses total $350,000 and are paid on February 15, 2015. Prepare Mayaguez’s December 31, 2014, adjusting entry and the February 15, 2015, entry.

A sand core used to form the internal surfaces of a steel casting experiences a buoyancy force of 23 kg. The volume of the mold cavity forming the outside surface of the casting = 5000 cm3 . What is the weight of the final casting? Ignore considerations of shrinkage

Are all capital gains (gains on the sale or disposition of capital assets) taxed at the same rate?Explain.

What is the primary mineral in glass products?

Dax Jones submitted his 2024 tax return on time and elected to file a joint tax return with his wife, Darlene. Dax and Darlene did not request an extension for their 2024 tax return. Dax and Darlene owed and paid the IRS $124,000 for their 2024 tax liability. Two years later, Dax amended his return and claimed married filing separate status. By changing his filing status, Dax sought a refund for an overpayment for the tax year 2024 (he paid more tax in the original joint return than he owed on a separate return). Is Dax allowed to change his filing status for the 2024 tax year and receive a tax refund with his amended return?

Wood-Mode Company is involved in the design, manufacture, and installation of various types of wood products for large construction projects. Wood-Mode recently completed a large contract for Stadium Inc., which consisted of building 35 different types of concession counters for a new soccer arena under construction. The terms of the contract are that upon completion of the counters, Stadium would pay $2,000,000. Unfortunately, due to the depressed economy, the completion of the new soccer arena is now delayed. Stadium has therefore asked Wood-Mode to hold the counters at its manufacturing plant until the arena is completed. Stadium acknowledges in writing that it ordered the counters and that they now have ownership. The time that Wood-Mode Company must hold the counters is totally dependent on when the arena is completed. Because Wood-Mode has not received additional progress payments for the arena due to the delay, Stadium has provided a deposit of $300,000. Instructions (a) Explain this type of revenue recognition transaction. (b) What factors should be considered in determining when to recognize revenue in this transaction? (c) Prepare the journal entry(ies) that Wood-Mode should make, assuming it signed a valid sales contract to sell the counters and received at the time of sale the $300,000 payment.

If a true centrifugal casting operation were to be performed in a space station circling the Earth, how would weightlessness affect the process?

Hagar Corporation has municipal bonds classified as availablefor- sale at December 31, 2013. These bonds have a par value of $800,000, an amortized cost of $800,000, and a fair value of $720,000. The unrealized loss of $80,000 previously recognized as other comprehensive income and as a separate component of stockholders’ equity is now determined to be other than temporary. That is, the company believes that impairment accounting is now appropriate for these bonds. Instructions (a) Prepare the journal entry to recognize the impairment. No entry is needed to adjust accumulated other comprehensive income. (b) What is the new cost basis of the municipal bonds? Given that the maturity value of the bonds is $800,000, should Hagar Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? (c) At December 31, 2014, the fair value of the municipal bonds is $760,000. Prepare the entry (if any) to record this information.

Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2014 due to a single cumulative temporary difference of $375,000. At the end of 2015, this same temporary difference has increased to a cumulative amount of $500,000. Taxable income for 2015 is $850,000. The tax rate is 40% for all years. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2015, assuming that it is probable that the deferred tax asset will be realized. (b) Assuming that it is probable that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2015 to recognize this probability.

How is a process operating in statistical control distinguished from one that is not?

Explain the dilemma faced by banks when determining the optimal amount of capital to hold. A bank’s capital is less than 10 percent of its assets. How do you think this percentage would compare to that of manufacturing corporations? How would you explain this difference? (LO3)

The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and- Spencer-Annual-report-and-financial-statements-2012.pdf. Instructions Refer to M&S’s financial statements and the accompanying notes to answer the following questions. (a) What is the company’s main line of business? (b) In what countries does the company operate? (c) What is the address of the company’s corporate headquarters? (d) What is the company’s reporting currency?

Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an investment in City of Heflin bonds.  Using the U.S. tax rate schedule for married filing jointly (see Example 1-3), how much federal tax will they owe?  What is their average tax rate?  What is their effective tax rate?  What is their current marginal tax rate?

Assume that the US economy expands. What will determine the size of the multiplier effect on other countries?

On December 31, 2014, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2018. Faital Company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $70,000 salvage value. Instructions (Round answers to the nearest cent.) (a) Prepare the journal entry for the purchase on December 31, 2014. (b) Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2015. (c) Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2016.

A composite has a matrix of polyester with Kevlar-29 fibers. The volume fractions of polyester and Kevlar are 60% and 40%, respectively. The Kevlar fibers have a modulus of elasticity of 60 GPa in the longitudinal direction and 3 GPa in the transverse direction. The polyester matrix has a modulus of elasticity of 5.6 GPa in both directions. (a) Determine the modulus of elasticity for the composite in the longitudinal direction. (b) Determine the modulus of elasticity in the transverse direction

Who pays the second level of tax on a C corporation’s income? What is the tax rate applicable to the second level of tax, and when is it levied?

Explain why securities firms have used a high level of financial leverage in the past. How does such leverage affect their expected return and their risk? (LO4)

Which of the following markets do you think are contestable? (a) credit cards; (b) brewing; (c) petrol retailing; (d) insurance services; (e) compact discs?

Explain why the cost of commuting from home to work is not deductible as a business expense.

How have international mutual funds (IMFs) increased the international integration of capital markets among countries? (LO7)

On November 1, 2014, Columbo Company adopted a stock-option plan that granted options to key executives to purchase 30,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2015, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $40, and the fair value option-pricing model determines the total compensation expense to be $450,000. All of the options were exercised during the year 2017: 20,000 on January 3 when the market price was $67, and 10,000 on May 1 when the market price was $77 a share. Instructions Prepare journal entries relating to the stock option plan for the years 2015, 2016, and 2017. Assume that the employee performs services equally in 2015 and 2016.

Compare and contrast the tests for accruing income and those for accruing deductions for tax purposes.